Bloodshed puts Africa's energy future at risk
Conflicts such as South Sudan's mean oil-fuelled growth on the continent could stay a pipe dream, writes Keith Johnson.
Just a few months ago, South Sudan resumed pumping oil after a long, self-imposed hiatus. But now, after the latest bout of violence, wells are being shut down. It's a reminder that for all Africa's energy promise and grandiose dreams of oil-fuelled development, tapping those sources of wealth remains hostage to bad security and governance.
After a week of sporadic fighting around the South Sudanese capital of Juba, and some isolated, if horrific, violence in oilfields close to the border with Sudan, things took a turn for the worse last weekend when rebel troops captured the capital of Unity province. That is the epicentre of South Sudan's oilfields, and the starting point for the export pipeline that snakes north through Sudan to the Red Sea.
It's not clear how much of South Sudan's oil production has been affected. Foreign oil companies shut down wells in other oilfields at the weekend, but South Sudanese diplomats said oil was still flowing.
South Sudan does not produce much oil - about 250,000 barrels a day - but oil revenues are essential for both the government in Juba, and for South Sudan's long-time foes in Khartoum.
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What makes the threat to Sudanese oil especially painful is that oil production had just resumed after a 15-month hiatus, caused by a dispute with Sudan over how much South Sudan should pay to export its oil through the pipeline on Sudanese territory.
For now, the forces fighting on behalf of the South Sudanese government are actually proxies for Khartoum, one observer said. In other words, Sudan is reasserting control over the oil-producing regions it lost when South Sudan became independent in 2011.
South Sudan's unrest comes in the context of a wave of production disruptions across Africa and the Middle East that has, in essence, erased the production gains made in the US and elsewhere. All told, supply disruptions across the globe averaged about nearly 3 million barrels a day in late 2013, 50 per cent more than the level of disruptions over the previous few years.
Libya, for instance, has rocketed between a near-total shutdown during its civil war, which took about 1.5 million barrels a day off the global market, to an unexpectedly quick recovery. But regional tensions left over from the Libyan civil war have again conspired to kneecap the country's oil output.
Nigeria, once the oil powerhouse of southern Africa, has its own set of security challenges. The long-running battle between international oil companies and the Movement for the Emancipation of the Niger Delta has left burning refineries, exploded pipelines and evacuated offshore oil platforms. After a respite, it seems the movement is again on the warpath. Nigeria also struggles with rampant oil theft. Taken together, they have kept the output about 1 million barrels a day lower than it could be.
Supply outages matter because they make oil more expensive than it should be, dampening growth. And because major producers such as Saudi Arabia have to pump nearly full-out to make up that shortfall, there is less spare production capacity in the global oil market. That keeps it tighter and tenser, turning relatively small events that could threaten oil supplies into price spikes.
South Sudan's latest troubles go back to the Sudanese civil war, which began in the 1980s. But it's especially important today because the promise of massive oil reserves off the west coast of Africa, as well as in countries such as Kenya and Uganda, has sparked a wave of enthusiasm for Africa's energy future that could well collide with a darker reality.
More oil and gas discoveries have been made in east Africa in the past couple of years than anywhere else. Huge finds off the coast of West Africa have fuelled the hopes in Gulf of Guinea countries of a sudden windfall. Discoveries in Kenya have some dreaming of turning Mombasa into an oil-export hub. Uganda is bullish on its own prospects for oil production, and Africa's oily enthusiasm extends to such unlikely outposts as Ethiopia and the Democratic Republic of Congo. But turning that promise into reality faces plenty of challenges, as underscored by the violence in South Sudan. Security looms largest, but cronyism, weak laws, poor governance, corruption and domestic politics can combine to scuttle hopes of a quick, energy-fired economic bonanza.
While South Sudan is particularly problematic, other potential energy players have their own issues. The Democratic Republic of Congo does not offer legal security for investors, Kenya is digesting a new constitution, and Uganda faces its own challenges, including an ageing leadership.